Lucent triples profit

Deborah Cohen

CHICAGO: Lucent Technologies Inc., among the world's largest makers of telecommunications equipment, said its fourth-quarter earnings more than tripled, helped by improving demand in products for wireless networks and a growing service business.

Lucent, once the poster child for the industry's woes amid a sharp downturn in telecommunications spending, also gave a bullish outlook for 2005.

The company's shares rose after it said it expects revenue to rise at a mid-single-digit rate on a percentage basis, at pace with or ahead of the overall industry.

Lucent, which competes with Canada's Nortel Networks Corp. and France's Alcatel, posted its fifth consecutive quarterly profit and its first profitable year since fiscal 2000.

The company has trimmed health-care expenses, cut jobs and restructured to capitalize on demand for products that help companies integrate traditional phone services with emerging technologies such as voice calls sent over the Internet.

Murray Hill, New Jersey-based Lucent said net income rose to $348 million, or 7 cents a share, in the fiscal fourth quarter ended Sept. 30, from $99 million, or 2 cents a share, in the year-earlier period.

Before special items that added 3 cents a share, Lucent earned 4 cents a share, matching analysts' average forecasts, according to Reuters Estimates.

Revenues for the quarter rose to $2.40 billion from $2.03 billion for the year ago.

Wall Street had estimated total revenue of $2.30 billion on average.

"Revenues were a bit stronger than expected," said Steve Levy, an analyst with Lehman Bros. who rates Lucent his top pick in large-cap stocks, but owns no shares. "Maybe the most important thing is that the company seems to have enough confidence in their outlook to give solid guidance for growth in 2005."

For the year, Lucent reported net income of $1.14 billion compared with a net loss of $770 million in the year ago period.

Lucent had a net pension credit to earnings in the most recent fiscal year results of $868 million. Executives told analysts on the call that amount will likely fall by $200 million in fiscal 2005, due primarily to declining returns.

WIRELESS PRODUCTS, SERVICES BOOST REVENUE

Revenue for the quarter was fueled by demand for wireless telephone network base stations for customers such as Verizon Communications, and the technology that supports them.

The wireless business posted a revenue increase of 75 percent at $1.11 billion. Service revenue rose 9 percent to $514 million, as Lucent struck 16 new contracts, including a three-year deal with the U.S. Army.

"We really had a terrific year; we made some pretty dramatic improvement," Lucent Chief Executive Patricia Russo told Reuters in an interview. "We have a lot more to do; we know that."

Lucent's total operating expenses in the year ended Sept. 30 dropped to $2.6 billion from $2.9 billion a year earlier, helped by job cuts and other cost controls.

The company ended the most recent quarter with roughly 31,800 employees, down from 34,500 a year ago, and a peak of 157,000 in mid-2000.

On a conference call with analysts, executives said contract talks with Lucent's unions -- representing some 10 percent of its work force -- continue, as both sides work to hammer out a new agreement. Fresh talks began on Oct. 7.

Lucent's profit in most recent quarter saw a net benefit of 3 cents a share, as the re-evaluation of some warrants, and the recovery of bad debt and some financing offset charges related to the acquisition of Telica, a provider of voice over Internet protocol systems.

Shares in Lucent rose 10 cents, or nearly 3 percent, to close at $3.48 on the New York Stock Exchange.